Bass Bay Marina had a customer loyalty program at its gas dock. For every litre of gasoline purchased, the customer would get a redemption award of $.015 which can be used to purchase products in the company's retail marine store. In July, the company sold 100,000 litres of gasoline. The entry to record the liability for the July sales would a $___ credit to ___.

Question

Quizplus · Accepted Answer

For every litre of gasoline purchased, the customer would get a redemption award of $.015 which can be used to purchase products in the company's retail marine store. Hence, Bass Bay Marina has a liability to redeem these awards for the customers. The liability account to be credited is the Redemption Reward Liability account. The amount to be credited is calculated by multiplying the total litres sold (100,000) by the redemption award per litre ($.015), which is $1,500. Hence, the entry to record the liability for the July sales would be a $1,500 credit to Redemption Reward Liability. Option A is the correct answer. Option B is incorrect as there is no discount involved here. Option C is incorrect as the company did not receive any cash for the awards. Option D is incorrect as it does not take into account the liability for the redemption awards.

Bass Bay Marina Had a Customer Loyalty Program at Its